Carlsberg Said To Weigh Bid For $1.2b Tsingtao Stake

Carlsberg A/S, the Danish beer maker, is weighing the purchase of a 20 per cent stake in China’s Tsingtao Brewery Co, people familiar with the matter said.

The Copenhagen-based company is working with an adviser on a potential bid for the Tsingtao stake being sold by Asahi Group Holdings Ltd, said the people, who asked not to be identified because the information is private. No final decision has been made, according to the people. The shares in Tsingtao, based in a port city in eastern China’s Shandong province, are worth about $1.2 billion based on Wednesday’s close in Hong Kong, data compiled by Bloomberg show.

Tsingtao rose as much as 5.9 per cent in Hong Kong trading Thursday, hitting the highest level in more than a year, and was up 4 per cent to HK$35.45 at 2:59 pm in Hong Kong. The city’s benchmark Hang Seng Index gained 0.3 per cent.

Tying up with Carlsberg could help Tsingtao as it grapples with competition from China Resources Beer Holdings Co’s best-selling Snow lager and Anheuser-Busch InBev NV’s Budweiser label. Carlsberg already owns about 60 per cent of rival Chinese beer maker Chongqing Brewery Co, in addition to selling its own brands in the country including Tuborg, Kronenbourg 1664 Blanc and its namesake pilsner.

“Tsingtao is fighting a battle on multiple fronts and they’re overwhelmed,” Jeremy Yeo, a Hong Kong-based analyst at Mizuho Securities Asia Ltd, said by phone Thursday. “The Carlsberg interest represents the best chance Tsingtao has had in ten years.”

Emerging Economies

Asahi, the largest Japanese brewer, is exploring a potential sale of its minority Tsingtao holding, people with knowledge of the matter said last month. Asahi president Akiyoshi Koji said in a January interview the company will decide this year on options for its Tsingtao stake, as “ownership without control doesn’t make much sense.”

Representatives for Carlsberg and Asahi declined to comment.

Carlsberg has also been pursuing a stake in Vietnam’s Hanoi Beer Alcohol Beverage Corp as it seeks to boost its presence in faster-growing emerging markets. The Danish brewer may be trying to negotiate better terms than Asahi and could seek a Tsingtao board seat or specific distribution targets, Mizuho’s Yeo said.

Any deal would be positive for Tsingtao, which could add the Carlsberg brands to its portfolio mix and better compete against Budweiser, according to Cristobal Garcia, a managing director at Sanford C Bernstein & Co in Hong Kong.

Shrinking Market

“Carlsberg is the natural buyer, as they have no strategy for entering eastern China and are really the only player that would consider a non-control stake,” Garcia wrote in an e-mail to clients Thursday.

Brewers are trying to capture China’s higher-spending drinkers interested in premium labels as the country’s consumption of the beverage has declined amid a slowing economy. The Chinese beer market has shrunk 6.2 per cent from 2013 to 2015, according to Euromonitor International data.

As the most high-end of the local brands, Tsingtao is in competition with foreign brewers like AB InBev, whose Budweiser label has the biggest market share of foreign brands - 3 per cent in 2015, the data show. Tsingtao, which has a 15 per cent share through three brands, trails Snow, which had 22 per cent of the China market in 2015, according to Euromonitor.